System for appraising life insurance and annuities

ABSTRACT

A method and system of appraising a life insurance or annuity product includes receiving a request for a life insurance or annuity product and information about a party requesting the life insurance or annuity product; preparing a bid solicitation for the life insurance or annuity product based on the request and information and transmitting the bid solicitation to a plurality of product carriers; a plurality of product carriers submitting initial proposals for providing the life insurance or annuity product; generating ratings for the initial proposals, respectively; and generating appraisals for the initial proposals; and informing the product carriers of the decision.

BACKGROUND OF THE INVENTION

1. Field of the Invention

The present invention relates to an automated system for appraising value to consumers of a life insurance or annuity product, and more particularly, to a computer-based value appraising system.

2. Discussion of the Related Art

The financial services industry consists of industry segments such as insurance and banking. In turn, the insurance industry consists of industry segments such as life insurance, health insurance, and property and casualty insurance.

The life insurance industry includes product markets such as term life insurance, life insurance, variable life insurance, annuities, joint products, viatical settlements, preneed insurance, and long-term care insurance. Insurance carriers sell life insurance products through various distribution channels such as captive agents, independent agents, banks, affinity groups, and financial planners.

The present life insurance product markets for both insurance product proposals and in-force insurance products are inefficient. For insurance product proposals, the problem stems from: (1) an inadequate exchange of information between consumers and insurers during the selling process and, (2) the absence of a real-time auction market in which to price life insurance product proposals. Inefficient product markets for in-force insurance products stem from the absence of a system for measuring an insurance product's performance while that product is in-force.

An inadequate exchange of relevant and available information between consumers and insurers during the selling process is a significant source of product market inefficiency. Typically, consumers often do not receive relevant and available information necessary to make an informed purchase decision. Also, insurers frequently do not receive relevant and available information on the consumer and current market pricing necessary to tailor their proposals for optimal product performance and pricing. Such inefficient transmission of information results in product market inefficiency. Such product market inefficiency in the insurance industry adversely affects consumers and insurance companies.

Moreover, many life insurance products have complex features that consumers do not understand. Consumers' lack of insurance product knowledge opens the door to misleading sales practices such as twisting, churning, and vanishing premiums. Product “gimmickry,” such as lapse basing, preys on a consumer's inability to detect its existence. Recent, widely publicized accounts of race-based underwriting indicate that market conduct problems can go undetected for years by consumers, insurance company managements, and insurance industry regulators. Insurance industry regulators have attempted to enforce market conduct standards. Insurance companies have sought to curtail sales abuses. Their efforts have not solved the problem.

Market conduct problems occur regardless of an insurance company's financial strength. Favorable financial ratings are no indication of an insurer's compliance with market conduct standards. Independent rating firms evaluate an insurer's claims paying ability. They do not rate the products sold by insurers. The life insurance industry has no product rating system that appraises a proposed insurance product's total value to the consumer.

These and other market conduct problems point to the need for a system that assists the consumer in appraising a proposed insurance product's value.

The absence of a real-time auction market in which to price life insurance product proposals is a source of product market inefficiency. Currently, whether life insurance products are sold on the Internet or sold offline, the products are sold in a “fixed-priced” market. Typically, during the sales process, consumers and insurers cannot obtain real-time, market pricing information for products that are tailored to individual consumer needs. Thus, both consumers and insurers are deprived of opportunities to improve pricing before the sale closes. Consequently, some insurance products may be priced too high. In other cases, product prices may be too low.

Some insurers presently post fixed pricing information for standard products on the Internet, making it easier for consumers to compare prices for certain products. The Internet has made available more pricing information to consumers than ever before. However, while price comparisons allow the consumer to seek the lowest price for such fixed-price products, these price comparisons provide no other information to allow for an appraisal of the total value proposition.

Similarly, existing policyholders have no means for evaluating the performance of their in-force insurance policies. No system exists in the marketplace for appraising an in-force product's continuing value to the consumer.

Moreover, price is only one element in appraising an insurance product's total value proposition. No available systems provide consumers with information other than price to facilitate informed purchase decisions. Consumers need a system that appraises the total value proposition of life insurance product proposals. Such a system would lead to stronger product market efficiency.

In addition, even though present systems allow for price shopping on the Internet by consumers, from the insurer's perspective, such price shopping commoditizes insurance products. Thus, insurers are forced to compete on price alone and cannot differentiate products that provide other “non-price” value for consumers. Consequently, the attractiveness of the industry's structure declines, competitor rivalry increases, weak product substitutes proliferate, and entry barriers become lower across product markets. These structural changes squeeze margins and erode industry-wide profitability.

SUMMARY OF THE INVENTION

Accordingly, the present invention is directed to an evaluating system for a life insurance or annuity product that substantially obviates one or more of the problems due to limitations and disadvantages of the related art.

An advantage of the present invention is to provide an on-line, real-time system for evaluating a proposed life insurance or annuity product.

An advantage of the present invention is to provide an on-line, real-time system for evaluating an in-force life insurance or annuity product.

An advantage of the present invention is to provide an on-line, real-time system for evaluating a replacement life insurance or annuity product.

Another advantage of the present invention is to provide a system that creates efficient product markets for the benefit of the life insurance industry and its customers.

Another advantage of the present invention is to provide a system that enables insurance companies and insurance distribution channels to better serve their customers and to improve industry-wide profitability

Another advantage of the present invention is to provide a system to improve product pricing by pricing insurance products in an auction-style market.

Another advantage of the present invention is to provide a system for evaluating the current performance of an in-force life insurance or annuity product.

Additional features and advantages of the invention will be set forth in the description which follows, and in part will be apparent from the description, or may be learned by practice of the invention. The objectives and other advantages of the invention will be realized and attained by the structure particularly pointed out in the written description and claims hereof as well as the appended drawings.

To achieve these and other advantages and in accordance with the purpose of the present invention, as embodied and broadly described, a method of appraising a life insurance or annuity product includes the steps of receiving a request for a life insurance or annuity product and information about a party requesting the product; preparing a bid solicitation for the product based on the request and information and transmitting the bid solicitation to a plurality of product carriers; at least one of the plurality of product carriers providing a proposal for providing the life insurance or annuity product; automatically generating a numerical rating corresponding to each proposal and providing the numerical rating to the corresponding product carrier; allowing the plurality of product carriers to revise the proposals based on the numerical rating; the product carriers providing a final proposal; and generating an appraisal for each of the final proposals.

It is to be understood that both the foregoing general description and the following detailed description are exemplary and explanatory and are intended to provide further explanation of the invention as claimed.

BRIEF DESCRIPTION OF THE DRAWINGS

The accompanying drawings, which are included to provide a further understanding of the invention and are incorporated in and constitute a part of this specification, illustrate embodiments of the invention and together with the description serve to explain the principles of the invention.

In the drawings:

FIG. 1 is a block diagram that illustrates a preferred embodiment of the present invention.

FIG. 2 is a block diagram that illustrates parties involved in a business transaction according to the preferred embodiment of the present invention.

FIG. 3 is a block diagram that illustrates an embodiment of the present invention appraising the continuing value proposition to the policyholder of an in-force life insurance policy or annuity.

FIG. 4 is a block diagram that illustrates an embodiment of the present invention for a policyholder to query a product value appraisal system without the aid of a distribution channel.

FIG. 5 is a block diagram that illustrates an embodiment of the invention appraising the value proposition for replacing an in-force life insurance policy or annuity.

FIG. 6 is a block diagram that illustrates an embodiment of the present invention for a policyholder to query a product value appraisal system for rating an in-force life insurance policy or annuity.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

Reference will now be made in detail to the preferred embodiments of the present invention, examples of which are illustrated in the accompanying drawings.

The present invention relates to an evaluating system for a life insurance or annuity product under consideration for purchase, the ongoing value of a life insurance or annuity product already owned, or replacing a life insurance or annuity product. In addition, either as a separate process or in conjunction with this process, the product value appraisal system of the present invention enables an on-line, real-time auction process for pricing life insurance and annuity products. The present invention provides a system for appraising a life insurance or annuity product's total value proposition to the consumer. The product value appraisal system operates preferably via the Internet, but may be configured to work off-line or via a closed network or Intranet. The system is configured to support all categories of insurance transactions including, business-to-business, business-to-consumer, and business-to-employee. The system appraises life insurance product and annuity proposals as well as life insurance and annuity products that are in-force and replacement product proposals.

The present invention is applicable to a number of financial products within the life insurance industry, as well as annuities. Within the market for life insurance, there are a variety of products for which a system for appraising value is most useful. Term life policies provide a death benefit for a limited number of years after which they expire without value. They may insure the life of one person, or provide protection on the lives of two people (Joint Term policies). Joint Term policies are of two types: those that pay the death upon the first death to occur and those that pay upon the second death during the term.

Term products may have non-guaranteed premium structures (participating policies that pay dividends or “indeterminate premium” plans that feature a guaranteed maximum premium scale, but provide for the opportunity to pay a lower current premium based on current experience of the insurer) or fully guaranteed premiums that never change (non-participating plans). Term plans that provide a death benefit that is a constant amount over the term period may be renewable at the end of the term (e.g., Annually Renewable Term, 5-Year Renewable Term, etc.). A subset of renewable term plans is Reentry Term, which provides the opportunity for a lower renewal premium than otherwise available if the insured can provide evidence of continuing good health. Non-renewable term plans include 20-Year Term and Term to Age 65. Term plans that provide a death benefit that decreases over the term period are generally non-renewable and are purchased to insure a specific need. Mortgage Protection Term, often sold in connection with new residential home loans is a good example.

Ordinary life insurance plans are conceptually designed to provide death protection for the insured's entire lifetime. Unlike term life, they commonly provide for the accumulation of cash values that are available to the insured should the policy need to be terminated prior to death. Premiums for Ordinary Life can be structured to be payable for life or some finite number of years. Single Premium Life forms are even available. All Ordinary Life plans are generally available in joint life insurance (first-to-die) and joint and last survivor insurance forms in addition to single life forms. In order of decreasing guarantees (increasing risk) to the purchaser, these plans fall into the following types: nonparticipating whole life, indeterminate premium whole life, participating whole life, interest sensitive whole life, universal life insurance, variable whole life and variable universal life.

Nonparticipating whole life provides for guaranteed level premiums and a guaranteed death benefit with fully guaranteed cash values. The insurer assumes all risks and the purchaser does not participate in experience more favorable than the insurer's guarantees.

Indeterminate premium whole life insurance is a version of nonparticipating whole life insurance with indeterminate premiums, which is discussed above with regard to term life insurance.

Participating whole life insurance is similar to nonparticipating whole life, but offers the opportunity to receive annual dividends from the insurer if experience is more favorable than guarantees.

Interest sensitive whole life insurance is a version of nonparticipating whole life insurance under which the insurer credits excess interest over and above the policy's guarantee to the policy's cash values as current conditions warrant.

Universal life insurance is a version of nonparticipating whole life under which the insurer provides guarantees as to maximum charges for expenses and the mortality risk and minimum interest rates, but the amount of premium is based on current charges and interest rates. Thus, the insured is assuming a fair amount of risk with respect to future experience, primarily concerning interest rates. Considerable flexibility is provided for changes in the amount and timing of premium payments and the amount of the death benefit as well the ability to make withdrawals from the cash values. There is consequently no guarantee that the policy will be in effect at the insured's death if proper adjustments are not made in the premium payment pattern. This is a significant difference from the four types of Ordinary Life described above.

Variable whole life insurance is a form of nonparticipating whole life under which the insured assumes substantially all of the investment risk, including the risk of fluctuations in principal value as well as the interest rate risk. Fixed level premiums are provided, but the death benefit and cash values fluctuate with the investment performance of the mutual funds selected by the insured for investment of the premiums. There is a minimum guaranteed death benefit payable whenever the insured's death occurs.

Variable universal life insurance is a combination of variable whole life insurance and universal life insurance. Variable universal life insurance represents the life product type with the fewest traditional insurer guarantees and thus the greatest assumption of risk by the insured. In return for assuming this risk, the insured has the upside potential of receiving a significant better value in favorable economic environments than under the other product types.

As shown in FIG. 1, the product value appraisal system of the present invention simultaneously solicits, prices, and rates life insurance and annuity policy proposals. FIG. 1 illustrates a “business-to-business” transaction.

A party seeking a life insurance or annuity product, the proposed insured 104, requests a life insurance or annuity product through a distribution channel 108 that sells such products to consumers, as illustrated by step 1 in FIG. 1. The proposed insured 104 also provides the distribution channel 108 with information necessary for the distribution channel to request proposals from carriers who sell that product type. This information includes the risk profile of the proposed insured 104 for the product. Demographic and risk profile data include, for example, the proposed insured's age, sex, smoking habits, amount of insurance or annuity benefit desired, the pattern of premium payments and the pattern of disbursements desired from the product.

Next, the distribution channel 108 transmits to a product value appraisal system (“PVAS”) 112 information provided by the proposed insured 104, including the demographic and risk profile information as inputs to the product value appraisal system 112, as illustrated by step 2 of FIG. 1.

Then, the product value appraisal system 112 initiates bidding and/or invites proposals from interested product providers or carriers 116 by sending a proposed opening bid or invitation for proposal to a participating insurance carrier 116, as illustrated by step 3 of FIG. 1. The opening bid provided by the product value appraisal system 112 may include an opening price with a minimum product rating.

After initiating bidding or inviting proposals, the product value appraisal system 112 proceeds in an on-line, real-time, iterative process with the insurance carriers 116, as illustrated by step 4 of FIG. 1. Upon receipt of a bid or proposal from a participating insurance carrier 116, the product value appraisal system 112 reviews each bid or proposal and rates the bid or proposal and the pricing of each bid or proposal.

With each product proposal, the insurance carrier will transmit information about the price and benefits of its product along with identifying information about itself. This data includes data about the product's proposed benefits and price on both a guaranteed and illustrated basis, and information about the insurance company proposing the product. Product data include the proposed premiums to be paid and the proposed benefits to be provided, both distinguished between guaranteed amounts and illustrated amounts that depend on assumptions about the future. The insurance company information includes data that quantifies the financial strength of the insurance company. The product value appraisal system 112 will use appropriate actuarial assumptions, such as mortality information specific to the end customer's risk profile, and traditional actuarial present value methodology to determine a numeric rating of the benefits offered in light of the proposed price, the Product Value For Money, as represented in FIG. 1. Numeric ratings will also be assigned to other key scoring drivers: the product's performance under less optimistic assumptions about future interest rates and at lower premium levels (Product Stress Tolerance); various company financial information (Management Performance); previous interest rates actually credited to the product's values (Historical Credited Rates); various qualitative measures of customer service (Customer Service Quality); and the financial strength of the product provider (e.g., A.M. Best Rating). The numeric ratings for these six scoring drivers will then be weighed to arrive at an overall rating of the customer value proposition.

In one embodiment, a universal life insurance product, the first scoring driver, the product value for money, is determined using four metrics. The first and second metrics are based on projections of cash flow for groups of 1,000 policyholders. Each year, the system projects the number of policyholders dying, which is based on mortality tables appropriate for the gender, smoker status, and rating class of the insured, and the number of policyholders surrendering, which is based on lapse assumptions. Cash inflows consist of the premiums paid by survivors, and cash outflows consist of death and surrender benefits paid. The ratio of the present value of cash inflows to the present value of cash outflows is the cash-on-cash Internal Rate of Return (IRR). Two separate IRR calculations are made based on two different assumptions about lapses and surrender rates to provide the first and second metrics that make up the product value for money scoring driver.

The first IRR calculation is made based on lapse and surrender rates from the 1995 LIMRA life lapse rate study for the age and policy size of the client, i.e., empirical lapse and surrender rates. The second IRR calculation is made based on level lapse and surrender rates.

The third metric that factors into the product value for money scoring driver is the premium required to achieve the illustrated objective, typically the level premium to endow or to mature the policy at age 100. The fourth metric that factors into the product value for money scoring driver is an index of product flexibility. The index of product flexibility consists of one point for each of the following features: no-lapse guarantees, term riders, penalty-free withdrawals, preferred loans, refunds of cost-of-insurance (COI) charges, and persistency bonuses.

The next scoring driver, for the embodiment for universal life insurance, product stress tolerance, incorporates three metrics. The first metric is the ratio of the 20-year cash surrender value on mid-point assumptions (halfway between current assumptions and guaranteed assumptions) to the 20-year cash surrender value on current assumptions. Thus, the first metric measures the percentage drop in policy values if interest rates and mortality deteriorate. The second metric used in assessing product stress tolerance is the number of years the policy stays in force at the mid-point assumptions. This second metric measures the adequacy of the planned premium if interest rates and mortality both deteriorate from what was expected. Finally, the system calculates the IRR just as for the product value for money scoring driver, but with premiums cut in half after the third year. This third metric measures the drop in product performance should the policyholder reduce premium payments.

In the embodiment for universal life insurance products, Management Performance is measured using the following analytical metrics: (1) Five-year average Return on Equity (ROE); (2) ratio of ordinary life expenses to Generally Recognized Expense Table expenses (GRET); (3) five-year average of annual premium growth rate in excess of annual expense growth rate (PEGG); (4) five-year asset compound annual growth rate; (5) maximum earnings deviation from geometric path; (6) ratio of ordinary life expenses to ordinary life premiums; and (7) ratio of ordinary life expenses to ordinary life reserves. Information to support these metrics may be derived from a carrier's annual statutory statements, or if the company is a subsidiary of a larger life insurer, data is taken from the consolidated statutory statement for total U.S. operations for the larger insurer.

-   -   (1) The ROE for each year is net income divided by average of         beginning and ending capital & surplus for the carrier.     -   (2) Generally Recognized Expense Tables (GRET) are calculated as         follows (based on the 1998 Society of Actuaries factors): $65         per policy for new business, plus $33 per policy already issued,         plus $1.25 per unit for new business, plus 72% of new business         premiums.     -   (3) Five-year Average Premium Growth Rate in excess of Expense         Growth Rate (PEGG) is the average annual difference between the         ordinary life premium growth rate and the ordinary life expense         growth rate.     -   (4) Five-year Assets CAGR is the compound annualized growth rate         for the Assets over the last 5 years.     -   (5) Maximum earnings deviation from geometric path is the         maximum absolute difference between the net income in each of         the previous 5 years and the theoretical net income, if net         income had grown at exactly the 5-year net income CAGR, divided         by theoretical net income.     -   (6) & (7) Ordinary Life Expense is equal to line 22 (General         Insurance Expenses), column 3 (Life Insurance) in the Analysis         of Operations by Lines of Business. Ordinary Life Premium is the         sum of lines 1 & 1A (Premiums and Deposit-type funds), column 3,         in the Analysis of Operations by Lines of Business. Reserves are         the ordinary life reserves gross of reinsurance (Exhibit 8A) in         the annual statement.

The fourth scoring driver for the embodiment for universal life insurance products, historical credited rates, is a measure of the composite effects of historical rates. As a measure of the composite effect of historical rates, this scoring driver calculates the value of $1,000 at the beginning of each year accumulated at the historical credited rates for five years.

The fifth scoring driver for the embodiment for universal life insurance products, company service quality, is based on appropriate industry-sponsored surveys of carrier practices. One such survey is conducted by the Life Office Management Association (LOMA), an insurance trade association based in Atlanta, Ga. If this survey were to be used as the basis for this scoring driver, four metrics would emerge. The first metric is number of days between application and the offer of insurance. This metric captures one of the most often cited sources of customer satisfaction or dissatisfaction when applying first for a policy. The second metric is telephone service, which is based on a composite score of the following: (1) days per week that customer service is available; (2) average number of calls per customer service representative per day; (3) number of hours a day that customer service is available; and (4) availability of 800 numbers. The third metric is an index of Internet service, consisting of one point for each of the following features: (1) availability of a web page for the carrier; (2) availability of specific product information on the web page; (3) online quotation availability; (4) online application capability; (5) access to customer account information and policy values; (6) capability to change customer information online (address, beneficiary, etc.); and (7) application status tracking capability. The fourth metric is the number of days to complete standard service functions. This fourth metric is the average of the days to complete each of the following: (1) process a cash loan request; (2) process a cash surrender request; (3) pay an uncontested death claim; and (4) reply to customer correspondence.

The final scoring driver for the embodiment for universal life insurance products is A.M. Best's Ratings, which represent the opinion of one rating agency, A. M. Best Company, as to the insurer's financial strength and ability to meet ongoing obligations to policyholders.

The product value rating, the individual driver numeric scores, and the scores for all the metrics are all converted to a “normalized” scale between 0 and 5. The higher the score, the better the product value. The product value rating is the weighted average of the six driver scores. For scoring drivers based on more than one metric, the driver score is the weighted average of the scores for each metric.

The weights reflect the relative importance of each of the scoring drivers in evaluating life insurance and annuity products. The weights for each driver, and for each metric within the drivers, are shown in Table A for the embodiment for universal life insurance products.

TABLE A Weighting Summary Driver Metric I. Product Value for Money 40% IRR - current assumptions, LIMRA lapses 32.5%   IRR - current assumptions, level lapses 32.5%   Planned Premium to Achieve Objective 25% Product Flexibility 10% 100%  II. Product Stress Tolerance 20% Ratio of 20-year CSV for midpoint: current 60% assumptions Years in force at midpoint assumptions 20% IRR - current assumptions with 50% premium 20% years 4+ 100%  III. Management 20% Performance 5-year Average ROE 40% Actual Ordinary Life Expenses/Generally 20% Recognized Expense Table 5-year Average PEGG 10% 5-year Assets CAGR 10% Maximum Earnings Deviation from 10% Geometric Path Ordinary Life Expenses/Ordinary Life  5% Premium Ordinary Life Expenses/Ordinary Life  5% Reserves 100%  IV. Historical Credited Rates 10% V. Company Service Quality  5% Average time to offer 60% Telephone service 15% Website capabilities 15% Response time for standard requests 10% 100%  VI. Best's Rating  5% Total Weight of Drivers: 100% 

For each metric within a scoring driver, a high point and a low point are set. If that metric for any product exceeds the high point, that product's normalized score is set to 5. If the metric is below the low point, the normalized score is set to 0; if it lies between the high and low points, the normalized score is set by linear interpolation.

For Best's ratings, the normalizing methodology is approximated by tabulating 407 companies according to Best's ratings. A++ rated companies' normalized scores are set to 5. A+ rated companies are in the 88th percentile, so their normalized scores are set at 4.4 (88% of 5). A rated companies are in the 53rd percentile, so their normalized scores are set at 2.6, etc. Companies with a rating below B+ have their normalized scores set to 0. Companies on review for upgrade or downgrade may be adjusted halfway up or down to the next normalized score.

Thus, the product value appraisal system 112 simultaneously solicits, prices, and rates, life insurance policy and annuity proposals from insurance carriers. Soliciting, rating and pricing life insurance and annuity policy proposals are conducted in an iterative process. This process is conducted in real-time and preferably continues until optimal product pricing and product ratings have been obtained.

The product value appraisal system 112 continues to provide feedback to the insurance carriers, including rating information and whether the carrier's current bid or proposal meets the customer's minimum requirements. The insurance carrier can then provide a new bid or proposal, taking into consideration the feedback from the product value appraisal system 112. If the insurance carrier believes that its proposal is final, e.g., that it cannot submit a more competitive bid, it provides a final bid or proposal to the product value appraisal system 112.

Insurance carriers transmit their final product proposals to the product value appraisal system 112, as illustrated by step 5 of FIG. 1. Proposals received from insurance carriers must meet or exceed minimum product ratings established at the outset by the product value appraisal system 112. The ratings reflect the product proposal's total value proposition to the proposed insured. The total value proposition of a life insurance or annuity product proposal takes into account, among others, the proposed insured's risk profile together with such detailed information as the insurance product proposal, information on the insurer's financial strength, and information on current market prices.

The product value appraisal system 112 transmits or outputs rated product proposals to the distribution channel, as illustrated by step 6 of FIG. 1. This output includes an appraisal of the entire value proposition for the proposed insured. The appraisal takes such form as a numerical index, an alphabetic grade, or a descriptive phrase such as “superior,” “above average,” “average,” “below-average,” or “unacceptable.” These results are communicated to the proposed insured by the distribution channel, as illustrated by step 7 of FIG. 1. Appropriate explanatory comments may accompany this information.

Next, the proposed insured makes a purchase decision and communicates that decision to the distribution channel, as illustrated by step 8 of FIG. 1. The proposed insured's purchase decision flows back to the insurance carriers via the distribution channel and the product value appraisal system, as illustrated by steps 9 and 10 of FIG. 1.

FIG. 2 illustrates a more detailed view of the parties involved in the valuation system. Insurance carriers 216 (Ins. Co. A, B, C, D, E, F, . . . ) represent competing insurance carriers available to propose insurance products to meet customer requirements according to the present invention. The product value appraisal system 212 for soliciting, pricing, and rating life insurance and annuity product proposals in a real-time, iterative process is shown. The product value appraisal system 212 may also rate the performance of in-force life insurance policies and annuities and measures the value proposition of replacing in-force insurance policies and annuities. Distribution channels 208 include, among others, aggregators, banks, non-bank institutions, bank trusts, insurance agents, brokers, financial planners and advisors, funeral homes, place of employment, affinity groups and other carriers.

In addition, another embodiment of the present invention provides a method of valuing in-force life insurance and annuity policies and rates the continuing value proposition to the policyholder. As shown in FIG. 3, the product value appraisal system 312 collects, processes and uses available information on the insurance policyholder, the in-force policy, and the insurance company that issued the in-force policy to rate the performance of the in-force policy.

Further, if requested by the policyholder, the product value appraisal system 312 determines the value proposition involved in replacing the in-force policy. If a valuation of a replacement policy is requested, the process proceeds in a manner similar to that process described with regard to FIG. 1. For example, the product value appraisal system 312 solicits, auctions and rates replacement life insurance and annuity policy proposals to compare their value proposition to that of the in-force policy. Second, the product value appraisal system 312 calculates whether replacing the in-force policy would create value for the policyholder, particularly in view of the existing in-force policy.

As shown in FIG. 4, it is possible for an entity including a consumer seeking a life insurance or annuity product to invoke the product value appraisal system 412 without the aid of a distribution channel. As shown in step 1 of FIG. 4, a party seeking such a product, the proposed insured, 404 contacts the product value appraisal system 412, typically via a website interface. The proposed insured 404 provides to the product value appraisal system 412 information necessary to request proposals for life insurance or annuity products. This information provided by the proposed insured includes demographic information and information for developing a risk profile of the proposed insured 404 for the product to be evaluated. Demographic and risk profile data may include, for example, the proposed insured's age, sex, smoking habits amount of insurance desired, the pattern of premium payments and the pattern of disbursements desired from the product. A knowledgeable proposed insured may also provide information about the insurance policy sought, including the proposed premiums to be paid and the proposed benefits to be provided. The proposed insured may also include information as to preferred carriers.

Then, the product value appraisal system 412 initiates bidding and/or invites proposals from interested product providers or carriers 416 by sending a proposed opening bid or invitation for proposal to participating insurance carriers 416, as illustrated by step 2 of FIG. 4. The opening bid provided by the product value appraisal system 412 may include an opening price with a minimum product rating.

After initiating bidding or inviting proposals, the product appraisal system 412 proceeds in an on-line, real-time, iterative process with the insurance carriers 416, as illustrated by step 3 of FIG. 4. Upon receipt of a bid or proposal from a participating insurance carrier 416, the product value appraisal system 412 reviews each bid or proposal and rates the bid or proposal and the pricing of each bid or proposal.

With each product proposal, the carrier 416 will transmit information about the price and benefits of its product along with identifying information about itself. This data includes data about the product's proposed benefits and price on both a guaranteed and illustrated basis, and information about the insurance company proposing the product. Product data include the proposed premiums to be paid and the proposed benefits to be provided, both distinguished between guaranteed amounts and illustrated amounts that depend on assumptions about the future. The insurance company information includes data that quantifies the financial strength of the insurance company. The product value appraisal system 412 will use appropriate actuarial assumptions, such as mortality information specific to the end customer's risk profile, and traditional actuarial present value methodology to determine a numeric rating of the benefits offered in light of the proposed price (Product Value For Money in FIG. 1). Numeric ratings will also be assigned to the product's performance under less optimistic assumptions about future interest rates and at lower premium levels (Product Stress Tolerance), various company financial information (Management Performance), previous interest rates actually credited to the product's values (Historical Credited Rates), various qualitative measures of customer service (Customer Service Quality) and to the financial strength of the product provider (e.g., A.M. Best Rating). These ratings will then be weighted to arrive at an overall rating of the customer value proposition. Details of these six scoring drivers and the formulas for the product value appraisal system are as described above for the embodiment for universal life insurance.

Thus, the product value appraisal system 412 simultaneously solicits, prices, and rates, life insurance and annuity policy proposals from insurance carriers 416. Soliciting, rating and pricing these life insurance and annuity policy proposals are conducted in an iterative process. This process is preferably conducted in real-time and continues until optimal product pricing and product ratings have been obtained. Although each insurance carrier can make one proposal at a time, multiple proposals can also be made by each carrier to generate multiple ratings with multiple prices.

The product value appraisal system 412 continues to provide feedback to the insurance carriers 416, including rating information and whether the carrier's current bid or proposal meets the customer's minimum requirements. The insurance carrier can then provide a new bid or proposal, taking into consideration the feedback from the product value appraisal system 412. If the insurance carrier believes that its proposal is final, e.g., that it cannot submit a more competitive bid, it provides a final bid or proposal to the product value appraisal system 412.

Insurance carriers 416 transmit their final product proposals to the product value appraisal system, as illustrated by step 4 of FIG. 4. Proposals received from insurance carriers 416 must meet or exceed minimum product ratings established at the outset by the product value appraisal system 412. The ratings reflect the insurance or annuity product proposal's total value proposition to the proposed insured 404. The total value proposition of a life insurance or annuity product proposal takes into account the proposed insured's risk profile together with detailed information about the life insurance or annuity product proposal, information on the insurer's financial strength, and information on current market prices.

The product value appraisal system 412 transmits rated product proposals to the proposed insured, as illustrated by step 5 of FIG. 4. This output includes an appraisal of the entire value proposition for the proposed insured 404. The appraisal takes such form as a numerical index, an alphabetic grade, or a descriptive phrase such as “superior,” “above average,” “average,” “below-average,” or “unacceptable.” Appropriate explanatory comments may accompany this information.

Next, the proposed insured 404 may make a purchase decision and communicate that decision to the product value appraisal system 412, as illustrated by step 6 of FIG. 4. The proposed insured's purchase decision flows back to the insurance carriers 416 via the product value appraisal system 412, as illustrated by step 7 of FIG. 4.

FIG. 5 illustrates an embodiment of the invention appraising the value proposition for replacing an in-force policy. As shown in FIG. 5, it is possible for the holder of an existing policy to query the policy appraisal system or product value appraisal system 512 to appraise the value of the in-force policy and also appraise the value proposition for replacing the in-force policy. As shown in FIG. 5, step 1, the policyholder 504 contacts a distribution channel 508 to assist in obtaining such appraisal. The distribution channel then contacts the product value appraisal system 512, as shown in step 2.

The product value appraisal system 512 then collects, processes and uses available information on the insurance policyholder, the in-force policy, and the insurance company that issued the in-force policy to rate the performance of the in-force policy. The product value appraisal system 512 uses appropriate actuarial assumptions, such as mortality information specific to the end customer's risk profile, and traditional actuarial present value methodology to determine a numeric rating of the benefits offered in light of the price (Product Value For Money in FIG. 1). Numeric ratings will also be assigned to the product's performance under less optimistic assumptions about future interest rates and at lower premium levels (Product Stress Tolerance), various company financial information (Management Performance), previous interest rates actually credited to the product's values (Historical Credited Rates), various qualitative measures of customer service (Customer Service Quality) and to the financial strength of the product provider (e.g., A.M. Best Rating). These ratings will then be weighted to arrive at an overall rating of the customer value proposition. Details of these six scoring drivers and the formulas for the product value appraisal system are as described above for the embodiment for universal life insurance products. Information regarding the rating and value proposition are transmitted to the policyholder 504 via the distribution channel 508.

The product value appraisal system 512 also conducts a similar appraisal for a proposed replacement policy. If requested by the policyholder 504 via the distribution channel or by the distribution channel 508, the product value appraisal system 512 can solicit life insurance and annuity policy proposals from insurance carriers in the iterative processed described with regard to FIG. 1. Similarly, the policyholder 504 may provide information regarding the replacement policy under consideration to the product value appraisal system via the distribution channel 508, as illustrated by steps 5 and 6.

Although FIG. 5 illustrates a policyholder invoking the product value appraisal system via a distribution channel, it is possible for the policyholder to contact the product value appraisal system directly to conduct an analysis of an in-force policy and appraisal of the value proposition for replacing the in-force policy.

As shown in FIG. 6, it is possible for the holder of an existing policy to query the product value appraisal system to value the in-force policy without the aid of a distribution channel. As shown in FIG. 6, the policyholder 604 contacts the product value appraisal system 612, for example, via a website. The product value appraisal system 612 then collects, processes and uses available information on the insurance policyholder, the in-force policy, and the insurance company that issued the in-force policy to rate the performance of the in-force policy.

Further, if requested by the policyholder, the product value appraisal system 512 determines the value proposition involved in replacing the in-force policy. If a valuation of a replacement policy is requested, the process proceeds in a manner similar to that process described with regard to FIG. 4. For example, the valuation system solicits, auctions and rates replacement insurance policy proposals to compare their value proposition to that of the in-force policy. Second, the invention calculates whether replacing the in-force policy would create value for the policyholder, particularly in view of the existing in-force policy.

Revenues for use of the product value appraisal system are generated from subscription fees from life insurance product or annuity providers for participation in the auction process, transaction fees from the providers for the processing of bids and appraising the customer value proposition of proposals submitted, transaction fees from the distribution channel to receive the output from valuation system, and data subscription fees from the product providers to access the market intelligence data that will accumulate over time. Moreover, the valuation system may be provided as value-added services to the distribution channels, or to consumers directly, who pay a fee to use the service.

An example of the valuation system of the present invention is provided. John Consumer is reviewing his estate plan with his personal, fee-based financial advisor. The advisor recommends the purchase of an additional $250,000 of life insurance in an irrevocable trust to replace assets transferred to a Charitable Remainder Trust. Because it is not known when Mr. Consumer will die, a permanent (as opposed to term) form of insurance is recommended. Following some discussions of the various forms of permanent coverage, it is agreed to seek the best available life product to fill the need.

The financial advisor then goes on-line to the web site which places the financial advisor in contact with the product value appraisal system and commences a search for the best value for his client using the value appraisal system. In this example, the distribution channel is the financial advisor. As the distribution channel, the financial advisor, in response to prompts by the web site interface, enters the following information which is transmitted to the product value appraisal system: (1) risk profile data about John Consumer including, inter alia, his present age (45), sex (male), and smoking status (non-smoker); (2) the purpose of the proposed insurance (asset replacement to preserve his estate); (3) the desired pattern of premium payments (for life); (4) the disbursements desired from the policy (none prior to payment of the death benefit); and (5) face amount and type of product for which proposals are desired ($250,000 of life insurance).

The website receives the information and invokes the product value appraisal system, which opens an on-line, real-time proposal solicitation process for interested carriers. These proposals include, inter alia, policy illustrations showing the target premiums, guaranteed and illustrated benefits and cash values at select points in the future, and identifying information about the proposing carrier. Proposals are received from four carriers (A, B, C, and D). The product value appraisal system conducts an overall appraisal of the proposals received.

Product Value for Money

The cash flow was projected for the group of policyholders, using an industry mortality rate for nonsmokers of this policy size, and lapses (a) according to the LIMRA tables, as shown in Table B and (b) 5%, as shown in Tables C1-C4.

TABLE B Product Value for Money Mortality and LIMRA Lapse rates per 1,000 Age Duration Mortality Rate Lapse Rate 45 1 0.40 59 46 2 0.59 69 47 3 0.78 51 48 4 0.98 65 49 5 1.24 57 50 6 1.60 29 51 7 2.02 42 52 8 2.49 42 53 9 2.94 42 54 10 3.44 42 55 11 3.85 42 56 12 4.46 42 57 13 5.17 42 58 14 5.63 42 59 15 6.18 42 60 16 7.13 42 61 17 8.07 42 62 18 9.10 42 63 19 10.26 42 64 20 11.35 42 65 21 12.53 42 66 22 13.67 42 67 23 14.81 42 68 24 15.85 42 69 25 16.96 42 70 26 21.03 42 71 27 22.98 42 72 28 25.18 42 73 29 27.60 42 74 30 30.27 42 75 31 33.01 42 76 32 36.25 42 77 33 40.15 42 78 34 44.46 42 79 35 49.29 42 80 36 54.43 42 81 37 59.90 42 82 38 65.32 42 83 39 70.91 42 84 40 77.59 42 85 41 85.53 42 86 42 95.14 42 87 43 105.23 42 88 44 115.29 42 89 45 124.98 42 90 46 134.61 42 91 47 146.21 42 92 48 159.13 42 93 49 175.52 42 94 50 192.61 42 95 51 207.65 42 96 52 219.62 42 97 53 224.00 42 98 54 230.49 42 99 55 238.19 761.81 Note: Lapse rate at age 99 is to ensure that all policyholders lapse.

In each year, the cash flow is:

-   -   Premiums for lives in force at the beginning of the year, less     -   Expected deaths in the year multiplied by the Face Amount, less     -   Expected surrenders in the year multiplied by the Cash Surrender         Value.     -   Internal rates of return are then calculated. A commercial         software product, such as Microsoft Excel, which has an IRR         function, may be used for each product based on the cash flows.         Using the LIMRA lapse assumptions, for example, Company D the         highest IRR at 6.616%, and Company A has the lowest IRR at         5.073%. The high point is set at 6.5% and the low point at 4.5%.         Company D, being above the high point, receives a normalized         score of 5. Company A, by interpolation, receives a normalized         score of 1.4325, rounded to 1.4. A similar process is used for         the flat 5% lapse assumption. The IRR calculations for each of         the Companies A, B, C, and D are shown in Tables C1-C4.

TABLE C1 Product Value for Money -- Calculation of IRR - LIMRA Lapses Company A Age Duration Premium AV CSV DB Cash Flow IRR 45 1 2,125 526 0 250,000 2,027.14 5.073% 46 2 2,125 2,002 0 250,000 1,864.09 47 3 2,125 3,566 0 250,000 1,693.07 48 4 2,125 5,223 0 250,000 1,565.67 49 5 2,125 6,959 567 250,000 1,388.14 50 6 2,125 8,827 2,751 250,000 1,205.97 51 7 2,125 10,813 5,064 250,000 1,003.19 52 8 2,125 12,894 7,483 250,000 812.31 53 9 2,125 15,098 10,037 250,000 635.74 54 10 2,125 17,426 12,732 250,000 463.23 55 11 2,125 19,850 16,396 250,000 291.96 56 12 2,125 22,296 19,944 250,000 111.58 57 13 2,125 24,852 23,446 250,000 (65.26) 58 14 2,125 27,524 26,908 250,000 (193.46) 59 15 2,125 30,338 30,338 250,000 (319.55) 60 16 2,125 33,278 33,278 250,000 (469.45) 61 17 2,125 36,352 36,352 250,000 (603.74) 62 18 2,125 39,560 39,560 250,000 (734.97) 63 19 2,125 42,908 42,908 250,000 (865.03) 64 20 2,125 46,398 46,398 250,000 (974.62) 65 21 2,125 50,054 50,054 250,000 (1,079.20) 66 22 2,125 53,858 53,858 250,000 (1,167.40) 67 23 2,125 57,809 57,809 250,000 (1,243.07) 68 24 2,125 61,906 61,906 250,000 (1,299.40) 69 25 2,125 66,140 66,140 250,000 (1,350.62) 70 26 2,125 70,502 70,502 250,000 (1,582.22) 71 27 2,125 74,977 74,977 250,000 (1,647.34) 72 28 2,125 79,545 79,545 250,000 (1,708.99) 73 29 2,125 84,179 84,179 250,000 (1,763.59) 74 30 2,125 88,573 88,573 250,000 (1,808.46) 75 31 2,125 93,055 93,055 250,000 (1,837.56) 76 32 2,125 97,548 97,548 250,000 (1,868.36) 77 33 2,125 102,043 102,043 250,000 (1,902.89) 78 34 2,125 106,540 16,540 250,000 (1,384.83) 79 35 2,125 111,037 111,037 250,000 (1,942.39) 80 36 2,125 115,538 115,538 250,000 (1,939.12) 81 37 2,125 120,047 120,047 250,000 (1,918.18) 82 38 2,125 124,572 124,572 250,000 (1,870.75) 83 39 2,125 129,126 129,126 250,000 (1,805.84) 84 40 2,125 133,719 133,719 250,000 (1,742.95) 85 41 2,125 138,369 138,369 250,000 (1,679.76) 86 42 2,125 143,094 143,094 250,000 (1,616.67) 87 43 2,125 147,917 147,917 250,000 (1,531.49) 88 44 2,125 152,871 152,871 250,000 (1,422.26) 89 45 2,125 158,001 158,001 250,000 (1,293.41) 90 46 2,125 163,372 163,372 250,000 (1,156.21) 91 47 2,125 169,070 169,070 250,000 (1,029.28) 92 48 2,125 175,208 175,208 250,000 (905.19) 93 49 2,125 181,934 181,934 250,000 (792.92) 94 50 2,125 188,913 188,913 250,000 (677.31) 95 51 2,125 197,239 197,239 250,000 (557.51) 96 52 2,125 207,171 207,171 250,000 (442.56) 97 53 2,125 219,020 219,020 250,000 (335.01) 98 54 2,125 233,154 233,154 250,000 (254.31) 99 55 2,125 250,016 250,016 250,016 (595.21)

TABLE C2 Product Value for Money -- Calculation of IRR - LIMRA Lapses Company B Age Duration Premium AV CSV DB Cash Flow IRR 45 1 1,953 909 0 250,000 1,855.14 6.185% 46 2 1,953 2,409 0 250,000 1,702.31 47 3 1,953 3,972 0 250,000 1,542.54 48 4 1,953 5,638 663 250,000 1,387.20 49 5 1,953 7,434 2,911 250,000 1,151.34 50 6 1,953 9,465 5,394 250,000 1,024.52 51 7 1,953 11,611 7,992 250,000 794.56 52 8 1,953 13,879 10,713 250,000 604.31 53 9 1,953 16,275 13,561 250,000 429.05 54 10 1,953 18,803 16,541 250,000 258.47 55 11 1,953 21,446 19,637 250,000 110.56 56 12 1,953 24,203 22,847 250,000 (53.52) 57 13 1,953 27,068 26,164 250,000 (218.51) 58 14 1,953 30,045 29,593 250,000 (338.77) 59 15 1,953 33,139 33,139 250,000 (460.29) 60 16 1,953 36,357 36,537 250,000 (612.25) 61 17 1,953 39,699 39,699 250,000 (741.12) 62 18 1,953 43,164 43,164 250,000 (869.93) 63 19 1,953 46,756 46,756 250,000 (997.11) 64 20 1,953 50,474 50,474 250,000 (1,103.34) 65 21 1,953 54,284 54,284 250,000 (1,203.31) 66 22 1,953 58,225 58,225 250,000 (1,286.63) 67 23 1,953 62,293 62,293 250,000 (1,357.18) 68 24 1,953 66,487 66,487 250,000 (1,408.21) 69 25 1,953 70,804 70,804 250,000 (1,454.08) 70 26 1,953 75,241 75,241 250,000 (1,680.31) 71 27 1,953 79,781 79,781 250,000 (1,739.86) 72 28 1,953 84,421 84,421 250,000 (1,796.15) 73 29 1,953 89,158 89,158 250,000 (1,845.76) 74 30 1,953 93,985 93,985 250,000 (1,888.48) 75 31 1,953 98,880 98,880 250,000 (1,914.94) 76 32 1,953 103,828 103,828 250,000 (1,943.12) 77 33 1,953 108,814 108,814 250,000 (1,974.94) 78 34 1,953 113,823 113,823 250,000 (1,996.37) 79 35 1,953 118,843 118,843 250,000 (2,008.32) 80 36 1,953 123,863 123,863 250,000 (2,001.52) 81 37 1,953 128,878 128,878 250,000 (1,976.72) 82 38 1,953 133,890 133,890 250,000 (1,925.18) 83 39 1,953 138,900 138,900 250,000 (1,855.96) 84 40 1,953 143,895 143,895 250,000 (1,788.58) 85 41 1,953 148,866 148,866 250,000 (1,720.70) 86 42 1,953 153,818 153,818 250,000 (1,652.81) 87 43 1,953 158,755 158,755 250,000 (1,562.79) 88 44 1,953 163,689 163,689 250,000 (1,448.82) 89 45 1,953 168,654 168,654 250,000 (1,315.47) 90 46 1,953 173,705 173,705 250,000 (1,174.12) 91 47 1,953 178,990 178,990 250,000 (1,043.56) 92 48 1,953 184,626 184,626 250,000 (916.32) 93 49 1,953 190,769 190,769 250,000 (801.38) 94 50 1,953 197,629 197,629 250,000 (683.83) 95 51 1,953 204,973 204,973 250,000 (562.11) 96 52 1,953 213,158 213,158 250,000 (445.51) 97 53 1,953 222,747 222,747 250,000 (336.72) 98 54 1,953 234,628 234,628 250,000 (255.23) 99 55 1,953 250,248 250,248 250,048 (596.19)

TABLE C3 Product Value for Money -- Calculation of IRR - LIMRA Lapses Company C Age Duration Premium AV CSV DB Cash Flow IRR 45 1 2,048 1,044 0 250,000 1,950.14 5.182% 46 2 2,048 2,589 0 250,000 1,791.66 47 3 2,048 4,174 0 250,000 1,625.68 48 4 2,048 5,823 0 250,000 1,501.78 49 5 2,048 7,551 1,227 250,000 1,299.32 50 6 2,048 9,369 3,045 250,000 1,143.55 51 7 2,048 11,288 4,963 250,000 951.70 52 8 2,048 13,313 6,988 250,000 774.27 53 9 2,048 15,446 9,122 250,000 610.78 54 10 2,048 17,688 11,364 250,000 451.10 55 11 2,048 20,031 14,339 250,000 297.40 56 12 2,048 22,451 17,391 250,000 128.44 57 13 2,048 24,934 20,507 250,000 (40.53) 58 14 2,048 27,484 23,689 250,000 (163.93) 59 15 2,048 30,102 26,939 250,000 (287.78) 60 16 2,048 32,752 30,222 250,000 (445.88) 61 17 2,048 35,494 33,596 250,000 (586.89) 62 18 2,048 38,330 37,065 250,000 (723.54) 63 19 2,048 41,265 40,633 250,000 (857.86) 64 20 2,048 44,303 44,303 250,000 (970.67) 65 21 2,048 47,421 47,421 250,000 (1,067.49) 66 22 2,048 50,616 50,616 250,000 (1,147.79) 67 23 2,048 53,904 53,904 250,000 (1,215.79) 68 24 2,048 57,293 57,293 250,000 (1,264.85) 69 25 2,048 60,782 60,782 250,000 (1,309.34) 70 26 2,048 64,369 64,369 250,000 (1,534.93) 71 27 2,048 68,055 68,055 250,000 (1,594.93) 72 28 2,048 71,843 71,843 250,000 (1,652.53) 73 29 2,048 75,734 75,734 250,000 (1,704.32) 74 30 2,048 79,724 79,724 250,000 (1,750.03) 75 31 2,048 83,809 83,809 250,000 (1,780.38) 76 32 2,048 87,983 87,983 250,000 (1,813.30) 77 33 2,048 92,240 92,240 250,000 (1,850.69) 78 34 2,048 96,575 96,575 250,000 (1,878.47) 79 35 2,048 100,987 100,987 250,000 (1,897.52) 80 36 2,048 105,476 105,476 250,000 (1,898.42) 81 37 2,048 110,047 110,047 250,000 (1,881.81) 82 38 2,048 114,711 114,711 250,000 (1,838.75) 83 39 2,048 119,482 119,482 250,000 (1,778.16) 84 40 2,048 124,363 124,363 250,000 (1,719.41) 85 41 2,048 129,360 129,360 250,000 (1,660.10) 86 42 2,048 134,488 134,488 250,000 (1,600.60) 87 43 2,048 139,768 139,768 250,000 (1,518.66) 88 44 2,048 145,231 145,231 250,000 (1,412.29) 89 45 2,048 150,929 150,929 250,000 (1,285.90) 90 46 2,048 156,935 156,935 250,000 (1,150.76) 91 47 2,048 163,342 163,342 250,000 (1,025.55) 92 48 2,048 170,263 170,263 250,000 (902.82) 93 49 2,048 177,843 177,843 250,000 (791.59) 94 50 2,048 186,264 186,264 250,000 (677.00) 95 51 2,048 195,758 195,758 250,000 (557.72) 96 52 2,048 206,617 206,617 250,000 (442.98) 97 53 2,048 219,221 219,221 250,000 (335.47) 98 54 2,048 234,056 234,056 250,000 (254.76) 99 55 2,048 251,745 251,745 251,745 (599.60)

TABLE C4 Product Value for Money -- Calculation of IRR - LIMRA Lapses Company D Age Duration Premium AV CSV DB Cash Flow IRR 45 1 1,648 1,387 — 250,000 1,550.14 6.616% 46 2 1,648 2,800 — 250,000 1,415.43 47 3 1,648 4,242 — 250,000 1,275.62 48 4 1,648 5,717 — 250,000 1,169.85 49 5 1,648 7,255 523 250,000 1,020.37 50 6 1,648 8,833 2,435 250,000 864.48 51 7 1,648 10,482 4,430 250,000 684.49 52 8 1,648 12,180 6,487 250,000 517.91 53 9 1,648 13,929 8,609 250,000 366.15 54 10 1,648 15,705 10,772 250,000 219.51 55 11 1,648 17,453 12,923 250,000 96.68 56 12 1,648 19,174 15,062 250,000 (41.58) 57 13 1,648 21,011 17,333 250,000 (183.69) 58 14 1,648 22,969 19,744 250,000 (283.86) 59 15 1,648 25,058 22,308 250,000 (388.04) 60 16 1,648 27,287 25,032 250,000 (530.53) 61 17 1,648 29,664 27,932 250,000 (658.69) 62 18 1,648 32,200 31,012 250,000 (785.00) 63 19 1,648 34,905 34,295 250,000 (911.51) 64 20 1,648 37,790 37,790 250,000 (1,018.82) 65 21 1,648 40,816 40,816 250,000 (1,111.76) 66 22 1,648 43,943 43,943 250,000 (1,188.75) 67 23 1,648 47,230 47,230 250,000 (1,254.51) 68 24 1,648 50,616 50,616 250,000 (1,301.37) 69 25 1,648 54,111 54,111 250,000 (1,343.86) 70 26 1,648 57,657 57,657 250,000 (1,567.12) 71 27 1,648 61,286 61,286 250,000 (1,624.57) 72 28 1,648 65,034 65,034 250,000 (1,679.92) 73 29 1,648 68,893 68,893 250,000 (1,729.66) 74 30 1,648 72,878 72,878 250,000 (1,773.65) 75 31 1,648 76,961 76,961 250,000 (1,802.34) 76 32 1,648 81,159 81,159 250,000 (1,833.87) 77 33 1,648 85,490 85,490 250,000 (1,870.23) 78 34 1,648 89,913 89,913 250,000 (1,897.03) 79 35 1,648 94,450 94,450 250,000 (1,915.25) 80 36 1,648 99,103 99,103 250,000 (1,915.43) 81 37 1,648 103,843 103,843 250,000 (1,898.02) 82 38 1,648 108,731 108,731 250,000 (1,854.28) 83 39 1,648 113,745 113,745 250,000 (1,792.95) 84 40 1,648 118,901 118,901 250,000 (1,733.46) 85 41 1,648 124,220 124,220 250,000 (1,673.43) 86 42 1,648 129,756 129,756 250,000 (1,613.27) 87 43 1,648 135,527 135,527 250,000 (1,530.66) 88 44 1,648 141,585 141,585 250,000 (1,423.60) 89 45 1,648 147,976 147,976 250,000 (1,296.48) 90 46 1,648 154,755 154,755 250,000 (1,160.54) 91 47 1,648 161,991 161,991 250,000 (1,034.44) 92 48 1,648 169,755 169,755 250,000 (910.71) 93 49 1,648 178,135 178,135 250,000 (798.41) 94 50 1,648 187,254 187,254 250,000 (682.68) 95 51 1,648 197,236 197,236 250,000 (562.25) 96 52 1,648 208,253 208,253 250,000 (446.42) 97 53 1,648 220,519 220,519 250,000 (337.94) 98 54 1,648 234,314 234,314 250,000 (256.41) 99 55 1,648 250,002 250,002 250,002 (596.58)

Calculation of IRR based on a level lapse rate are shown in Tables D1-D4.

TABLE D1 Product Value for Money -- Calculation of IRR - Level Lapses Company A Age Duration Premium AV CSV DB Cash Flow IRR 45 1 2,125 526 0 250,000 2,026.69 4.806% 46 2 2,125 2,002 0 250,000 1,880.59 47 3 2,125 3,566 0 250,000 1,744.08 48 4 2,125 5,223 0 250,000 1,613.06 49 5 2,125 6,959 567 250,000 1,456.88 50 6 2,125 8,827 2,751 250,000 1,231.80 51 7 2,125 10,813 5,064 250,000 1,007.95 52 8 2,125 12,894 7,483 250,000 792.20 53 9 2,125 15,098 10,037 250,000 594.93 54 10 2,125 17,426 12,732 250,000 405.41 55 1 2,125 19,850 16,396 250,000 216.78 56 12 2,125 22,296 19,944 250,000 24.34 57 13 2,125 24,852 23,446 250,000 (159.84) 58 14 2,125 27,524 26,908 250,000 (292.34) 59 15 2,125 30,338 30,338 250,000 (419.27) 60 16 2,125 33,278 33,278 250,000 (563.88) 61 17 2,125 36,352 36,352 250,000 (690.84) 62 18 2,125 39,560 39,560 250,000 (812.29) 63 19 2,125 42,908 42,908 250,000 (930.11) 64 20 2,125 46,398 46,398 250,000 (1,026.55) 65 21 2,125 50,054 50,054 250,000 (1,116.30) 66 22 2,125 53,858 53,858 250,000 (1,189.14) 67 23 2,125 57,809 57,809 250,000 (1,248.93) 68 24 2,125 61,906 61,906 250,000 (1,289.93) 69 25 2,125 66,140 66,140 250,000 (1,325.16) 70 26 2,125 70,502 70,502 250,000 (1,517.01) 71 27 2,125 74,977 74,977 250,000 (1,560.13) 72 28 2,125 79,545 79,545 250,000 (1,598.79) 73 29 2,125 84,179 84,179 250,000 (1,629.99) 74 30 2,125 88,573 88,573 250,000 (1,651.26) 75 31 2,125 93,055 93,055 250,000 (1,658.30) 76 32 2,125 97,548 97,548 250,000 (1,665.94) 77 33 2,125 102,043 102,043 250,000 (1,675.80) 78 34 2,125 106,540 16,540 250,000 (1,146.61) 79 35 2,125 111,037 111,037 250,000 (1,669.07) 80 36 2,125 115,538 115,538 250,000 (1,646.39) 81 37 2,125 120,047 120,047 250,000 (1,609.52) 82 38 2,125 124,572 124,572 250,000 (1,551.99) 83 39 2,125 129,126 129,126 250,000 (1,481.50) 84 40 2,125 133,719 133,719 250,000 (1,413.59) 85 41 2,125 138,369 138,369 250,000 (1,346.42) 86 42 2,125 143,094 143,094 250,000 (1,280.33) 87 43 2,125 147,917 147,917 250,000 (1,198.61) 88 44 2,125 152,871 152,871 250,000 (1,100.39) 89 45 2,125 158,001 158,001 250,000 (989.56) 90 46 2,125 163,372 163,372 250,000 (874.88) 91 47 2,125 169,070 169,070 250,000 (770.06) 92 48 2,125 175,208 175,208 250,000 (669.52) 93 49 2,125 181,934 181,934 250,000 (579.56) 94 50 2,125 188,913 188,913 250,000 (489.22) 95 51 2,125 197,239 197,239 250,000 (398.10) 96 52 2,125 207,171 207,171 250,000 (312.54) 97 53 2,125 219,020 219,020 250,000 (234.19) 98 54 2,125 233,154 233,154 250,000 (175.96) 99 55 2,125 250,016 250,016 250,016 (398.31)

TABLE D2 Product Value for Money -- Calculation of IRR - Level Lapses Company B Age Duration Premium AV CSV DB Cash Flow IRR 45 1 1,953 909 0 250,000 1,854.69 6.034% 46 2 1,953 2,409 0 250,000 1,717.26 47 3 1,953 3,972 0 250,000 1,589.02 48 4 1,953 5,638 663 250,000 1,437.51 49 5 1,953 7,434 2,911 250,000 1,222.06 50 6 1,953 9,465 5,394 250,000 997.53 51 7 1,953 11,611 7,992 250,000 775.38 52 8 1,953 13,879 10,713 250,000 561.31 53 9 1,953 16,275 13,561 250,000 366.54 54 10 1,953 18,803 16,541 250,000 180.30 55 11 1,953 21,446 19,637 250,000 20.41 56 12 1,953 24,203 22,847 250,000 (152.05) 57 13 1,953 27,068 26,164 250,000 (321.74) 58 14 1,953 30,045 29,593 250,000 (444.47) 59 15 1,953 33,139 33,139 250,000 (565.64) 60 16 1,953 36,357 36,537 250,000 (712.11) 61 17 1,953 39,699 39,699 250,000 (832.40) 62 18 1,953 43,164 43,164 250,000 (950.64) 63 19 1,953 46,756 46,756 250,000 (1,064.74) 64 20 1,953 50,474 50,474 250,000 (1,156.97) 65 21 1,953 54,284 54,284 250,000 (1,241.18) 66 22 1,953 58,225 58,225 250,000 (1,308.26) 67 23 1,953 62,293 62,293 250,000 (1,362.10) 68 24 1,953 66,487 66,487 250,000 (1,397.02) 69 25 1,953 70,804 70,804 250,000 (1,426.20) 70 26 1,953 75,241 75,241 250,000 (1,612.04) 71 27 1,953 79,781 79,781 250,000 (1,649.05) 72 28 1,953 84,421 84,421 250,000 (1,681.88) 73 29 1,953 89,158 89,158 250,000 (1,707.74) 74 30 1,953 93,985 93,985 250,000 (1,726.57) 75 31 1,953 98,880 98,880 250,000 (1,730.72) 76 32 1,953 103,828 103,828 250,000 (1,735.51) 77 33 1,953 108,814 108,814 250,000 (1,742.48) 78 34 1,953 113,823 113,823 250,000 (1,740.08) 79 35 1,953 118,843 118,843 250,000 (1,729.34) 80 36 1,953 123,863 123,863 250,000 (1,703.06) 81 37 1,953 128,878 128,878 250,000 (1,662.33) 82 38 1,953 133,890 133,890 250,000 (1,600.74) 83 39 1,953 138,900 138,900 250,000 (1,526.07) 84 40 1,953 143,895 143,895 250,000 (1,453.84) 85 41 1,953 148,866 148,866 250,000 (1,382.25) 86 42 1,953 153,818 153,818 250,000 (1,311.68) 87 43 1,953 158,755 158,755 250,000 (1,225.52) 88 44 1,953 163,689 163,689 250,000 (1,123.00) 89 45 1,953 168,654 168,654 250,000 (1,008.15) 90 46 1,953 173,705 173,705 250,000 (889.81) 91 47 1,953 178,990 178,990 250,000 (781.83) 92 48 1,953 184,626 184,626 250,000 (678.58) 93 49 1,953 190,769 190,769 250,000 (586.37) 94 50 1,953 197,629 197,629 250,000 (494.41) 95 51 1,953 204,973 204,973 250,000 (401.70) 96 52 1,953 213,158 213,158 250,000 (314.80) 97 53 1,953 222,747 222,747 250,000 (235.46) 98 54 1,953 234,628 234,628 250,000 (176.61) 99 55 1,953 250,248 250,248 250,048 (398.97)

TABLE D3 Product Value for Money -- Calculation of IRR - Level Lapses Company C Age Duration Premium AV CSV DB Cash Flow IRR 46 1 2,048 1,044 0 250,000 1,949.69 4.891% 46 2 2,048 2,589 0 250,000 1,807.47 47 3 2,048 4,174 0 250,000 1,674.66 48 4 2,048 5,823 0 250,000 1,547.16 49 5 2,048 7,551 1,227 250,000 1,367.56 50 6 2,048 9,369 3,045 250,000 1,161.15 51 7 2,048 11,288 4,963 250,000 955.37 52 8 2,048 13,313 6,988 250,000 755.98 53 9 2,048 15,446 9,122 250,000 574.37 54 10 2,048 17,688 11,364 250,000 399.99 55 11 2,048 20,031 14,339 250,000 231.88 56 12 2,048 22,451 17,391 250,000 52.38 57 13 2,048 24,934 20,507 250,000 (123.22) 58 14 2,048 27,484 23,689 250,000 (250.81) 59 15 2,048 30,102 26,939 250,000 (375.86) 60 16 2,048 32,752 30,222 250,000 (530.52) 61 17 2,048 35,494 33,596 250,000 (665.66) 62 18 2,048 38,330 37,065 250,000 (793.72) 63 19 2,048 41,265 40,633 250,000 (916.72) 64 20 2,048 44,303 44,303 250,000 (1,017.10) 65 21 2,048 47,421 47,421 250,000 (1,098.71) 66 22 2,048 50,616 50,616 250,000 (1,163.41) 67 23 2,048 53,904 53,904 250,000 (1,215.43) 68 24 2,048 57,293 57,293 250,000 (1,249.20) 69 25 2,048 60,782 60,782 250,000 (1,277.90) 70 26 2,048 64,369 64,369 250,000 (1,464.07) 71 27 2,048 68,055 68,055 250,000 (1,502.54) 72 28 2,048 71,843 71,843 250,000 (1,537.73) 73 29 2,048 75,734 75,734 250,000 (1,566.79) 74 30 2,048 79,724 79,724 250,000 (1,589.64) 75 31 2,048 83,809 83,809 250,000 (1,598.64) 76 32 2,048 87,983 87,983 250,000 (1,609.07) 77 33 2,048 92,240 92,240 250,000 (1,622.42) 78 34 2,048 96,575 96,575 250,000 (1,627.09) 79 35 2,048 100,987 100,987 250,000 (1,624.02) 80 36 2,048 105,476 105,476 250,000 (1,605.88) 81 37 2,048 110,047 110,047 250,000 (1,573.63) 82 38 2,048 114,711 114,711 250,000 (1,520.67) 83 39 2,048 119,482 119,482 250,000 (1,454.62) 84 40 2,048 124,363 124,363 250,000 (1,390.89) 85 41 2,048 129,360 129,360 250,000 (1,327.61) 86 42 2,048 134,488 134,488 250,000 (1,265.04) 87 43 2,048 139,768 139,768 250,000 (1,186.48) 88 44 2,048 145,231 145,231 250,000 (1,091.00) 89 45 2,048 150,929 150,929 250,000 (982.52) 90 46 2,048 156,935 156,935 250,000 (869.78) 91 47 2,048 163,342 163,342 250,000 (766.55) 92 48 2,048 170,263 170,263 250,000 (667.26) 93 49 2,048 177,843 177,843 250,000 (578.26) 94 50 2,048 186,264 186,264 250,000 (488.83) 95 51 2,048 195,758 195,758 250,000 (398.17) 96 52 2,048 206,617 206,617 250,000 (312.81) 97 53 2,048 219,221 219,221 250,000 (234.52) 98 54 2,048 234,056 234,056 250,000 (176.28) 99 55 2,048 251,745 251,745 251,745 (401.25)

TABLE D4 Product Value for Money -- Calculation of IRR - Level Lapses Company D Age Duration Premium AV CSV DB Cash Flow IRR 45 1 1,648 1,387 0 250,000 1,549.69 6.335% 46 2 1,648 2,800 0 250,000 1,427.63 47 3 1,648 4,242 0 250,000 1,314.04 48 4 1,648 5,717 0 250,000 1,204.85 49 5 1,648 7,255 523 250,000 1,071.27 50 6 1,648 8,833 2,435 250,000 876.42 51 7 1,648 10,482 4,430 250,000 682.52 52 8 1,648 12,180 6,487 250,000 496.22 53 9 1,648 13,929 8,609 250,000 328.63 54 10 1,648 15,705 10,772 250,000 169.71 55 11 1,648 17,453 12,923 250,000 38.09 56 12 1,648 19,174 15,062 250,000 (105.62) 57 13 1,648 21,011 17,333 250,000 (250.46) 58 14 1,648 22,969 19,744 250,000 (351.92) 59 15 1,648 25,058 22,308 250,000 (455.32) 60 16 1,648 27,287 25,032 250,000 (593.21) 61 17 1,648 29,664 27,932 250,000 (714.96) 62 18 1,648 32,200 31,012 250,000 (832.59) 63 19 1,648 34,905 34,295 250,000 (948.10) 64 20 1,648 37,790 37,790 250,000 (1,043.62) 65 21 1,648 40,816 40,816 250,000 (1,122.18) 66 22 1,648 43,943 43,943 250,000 (1,184.43) 67 23 1,648 47,230 47,230 250,000 (1,235.16) 68 24 1,648 50,616 50,616 250,000 (1,267.66) 69 25 1,648 54,111 54,111 250,000 (1,295.26) 70 26 1,648 57,657 57,657 250,000 (1,479.95) 71 27 1,648 61,286 61,286 250,000 (1,516.76) 72 28 1,648 65,034 65,034 250,000 (1,550.58) 73 29 1,648 68,893 68,893 250,000 (1,578.46) 74 30 1,648 72,878 72,878 250,000 (1,600.44) 75 31 1,648 76,961 76,961 250,000 (1,608.63) 76 32 1,648 81,159 81,159 250,000 (1,618.48) 77 33 1,648 85,490 85,490 250,000 (1,631.59) 78 34 1,648 89,913 89,913 250,000 (1,636.04) 79 35 1,648 94,450 94,450 250,000 (1,632.88) 80 36 1,648 99,103 99,103 250,000 (1,614.73) 81 37 1,648 103,843 103,843 250,000 (1,582.35) 82 38 1,648 108,731 108,731 250,000 (1,529.35) 83 39 1,648 113,745 113,745 250,000 (1,463.16) 84 40 1,648 118,901 118,901 250,000 (1,399.27) 85 41 1,648 124,220 124,220 250,000 (1,335.79) 86 42 1,648 129,756 129,756 250,000 (1,273.06) 87 43 1,648 135,527 135,527 250,000 (1,194.30) 88 44 1,648 141,585 141,585 250,000 (1,098.57) 89 45 1,648 147,976 147,976 250,000 (989.76) 90 46 1,648 154,755 154,755 250,000 (876.60) 91 47 1,648 161,991 161,991 250,000 (772.84) 92 48 1,648 169,755 169,755 250,000 (672.90) 93 49 1,648 178,135 178,135 250,000 (583.16) 94 50 1,648 187,254 187,254 250,000 (492.91) 95 51 1,648 197,236 197,236 250,000 (401.41) 96 52 1,648 208,253 208,253 250,000 (315.25) 97 53 1,648 220,519 220,519 250,000 (236.24) 98 54 1,648 234,314 234,314 250,000 (177.40) 99 55 1,648 250,002 250,002 250,002 (399.23)

In this instance, the objective was to endow at age 100. A planned premium to achieve the objective for each of the example companies A, B, C, and D is shown in Table E.

TABLE E Product Value for Money - Planned Premium to Achieve Objective Company A Company B Company C Company D Planned $2,125 $1,953 $2,048 $1,648 Premium to Achieve Objective

The premiums to meet this objective are annual premiums, which range from $1,648 for Company D to $2,125 for Company A. The high and low points were set at $1,600 (normalized score of 5) and $2,500 (normalized score of 0) respectively, a range of $900. On this scale, Company D got a normalized score of 4.7 (48/900 of the way between 5 and 0).

For product flexibility, one point is given for each of the six features. The high point is 5 and the low point is 0. The interpolation here works out so that the normalized score is the number of points for each product, but not more than 5.

Product flexibility for each of the example companies A, B, C, and D, is shown in Table F.

TABLE F Product Value for Money - Flexibility Flexibility Company Company (1 = Y, 0 = N) Company A B Company C D No lapse guarantee 1 0 0 1 Term rider 1 1 1 1 Penalty-free 1 0 0 1 withdrawals Preferred loans 0 1 1 1 COI refunds 0 1 0 1 Persistency bonus 1 0 1 0 Total 4 3 3 5

Finally, the weighted average of the four metrics is calculated, giving effect to the weights from table A.

Product Stress Tolerance

A similar process is followed for this scoring driver. For two of the policies, Company A and Company C, the illustration at the midpoint in this example does not produce an IRR because the product failed. I.e., the policyholder group, on average, did not get back as much money as they put in. In those cases, the ratio of 20-year Cash Surrender Values provides a more discriminating metric.

Calculations for Product Stress Tolerance for each of the example companies is shown in Table G1-G4.

TABLE G1 Product Stress Tolerance - Midpoint Assumptions Company A Current Midpoint Age Duration Premium CSV DB Cash Value Cash Flow IRR 45 1 2,125 0 250,000 0 2,026.69 0.00% 46 2 2,125 0 250,000 0 1,880.59 47 3 2,125 0 250,000 0 1,744.08 48 4 2,125 0 250,000 0 1,613.06 49 5 2,125 567 250,000 0 1,479.89 50 6 2,125 2,751 250,000 43 1,336.05 51 7 2,125 5,064 250,000 1,485 1,138.59 52 8 2,125 7,483 250,000 2,904 950.61 53 9 2,125 10,037 250,000 4,298 783.00 54 10 2,125 12,732 250,000 5,651 625.12 55 11 2,125 16,396 250,000 7,798 469.26 56 12 2,125 19,944 250,000 9,664 309.87 57 13 2,125 23,446 250,000 11,265 159.95 58 14 2,125 26,908 250,000 12,581 62.96 59 15 2,125 30,338 250,000 13,619 (27.83) 60 16 2,125 33,278 250,000 13,867 (135.15) 61 17 2,125 36,352 250,000 13,910 (223.70) 62 18 2,125 39,560 250,000 13,703 (305.59) 63 19 2,125 42,908 250,000 13,199 (382.65) 64 20 2,125 46,398 250,000 12,343 (437.14) 65 21 2,125 50,054 250,000 11,087 (483.63) 66 22 2,125 53,858 250,000 9,359 (512.22) 67 23 2,125 57,809 250,000 7,087 (526.89) 68 24 2,125 61,906 250,000 4,190 (521.98) 69 25 2,125 66,140 250,000 560 (510.49) 70 26 2,125 70,502 250,000 0 (701.52)

TABLE G2 Product Stress Tolerance - Midpoint Assumptions Company B Current Midpoint Age Duration Premium CSV DB Cash Value Cash Flow IRR 45 1 1,953 0 250,000 0 1,854.69 0.00% 46 2 1,953 0 250,000 0 1,717.26 47 3 1,953 0 250,000 0 1,589.02 48 4 1,953 663 250,000 0 1,465.86 49 5 1,953 2,911 250,000 975 1,300.63 50 6 1,953 5,394 250,000 3,231 1,080.79 51 7 1,953 7,992 250,000 4,787 892.36 52 8 1,953 10,713 250,000 6,417 709.93 53 9 1,953 13,561 250,000 8,123 544.75 54 10 1,953 16,541 250,000 9,908 386.11 55 11 1,953 19,637 250,000 10,906 276.80 56 12 1,953 22,847 250,000 11,903 151.91 57 13 1,953 26,164 250,000 12,901 26.46 58 14 1,953 29,593 250,000 13,898 (55.26) 59 15 1,953 33,139 250,000 14,896 (138.52) 60 16 1,953 36,537 250,000 15,894 (256.16) 61 17 1,953 39,699 250,000 16,891 (357.65) 62 18 1,953 43,164 250,000 17,889 (455.34) 63 19 1,953 46,756 250,000 18,886 (551.17) 64 20 1,953 50,474 250,000 19,884 (627.54) 65 21 1,953 54,284 250,000 18,249 (656.13) 66 22 1,953 58,225 250,000 16,615 (675.28) 67 23 1,953 62,293 250,000 14,980 (688.59) 68 24 1,953 66,487 250,000 13,345 (689.93) 69 25 1,953 70,804 250,000 11,711 (692.11) 70 26 1,953 75,241 250,000 10,076 (858.28) 71 27 1,953 79,781 250,000 9,068 (889.97) 72 28 1,953 84,421 250,000 8,061 (922.85) 73 29 1,953 89,158 250,000 7,053 (953.88) 74 30 1,953 93,985 250,000 6,046 (982.81) 75 31 1,953 98,880 250,000 5,038 (1,001.76) 76 32 1,953 103,828 250,000 4,030 (1,025.81) 77 33 1,953 108,814 250,000 3,023 (1,056.41) 78 34 1,953 113,823 250,000 2,015 (1,081.81) 79 35 1,953 118,843 250,000 1,008 (1,102.67) 80 36 1,953 123,863 250,000 — (1,111.30)

TABLE G3 Product Stress Tolerance - Midpoint Assumptions Company C Current Midpoint Age Duration Premium CSV DB Cash Value Cash Flow IRR 45 1 2,048 0 250,000 0 1,949.69 0.00% 46 2 2,048 0 250,000 0 1,807.47 47 3 2,048 0 250,000 0 1,674.66 48 4 2,048 0 250,000 0 1,547.16 49 5 2,048 1,227 250,000 0 1,417.35 50 6 2,048 3,045 250,000 1,664 1,214.32 51 7 2,048 4,963 250,000 2,712 1,037.53 52 8 2,048 6,988 250,000 3,819 865.63 53 9 2,048 9,122 250,000 4,985 709.95 54 10 2,048 11,364 250,000 6,210 559.91 55 11 2,048 14,339 250,000 6,366 466.00 56 12 2,048 17,391 250,000 7,721 320.96 57 13 2,048 20,507 250,000 9,104 176.13 58 14 2,048 23,689 250,000 10,517 75.84 59 15 2,048 26,939 250,000 11,960 (25.16) 60 16 2,048 30,222 250,000 13,418 (159.36) 61 17 2,048 33,596 250,000 14,915 (276.82) 62 18 2,048 37,065 250,000 16,456 (389.85) 63 19 2,048 40,633 250,000 18,040 (500.38) 64 20 2,048 44,303 250,000 19,669 (590.74) 65 21 2,048 47,421 250,000 18,536 (629.74) 66 22 2,048 50,616 250,000 17,404 (658.18) 67 23 2,048 53,904 250,000 16,271 (679.72) 68 24 2,048 57,293 250,000 15,138 (688.31) 69 25 2,048 60,782 250,000 14,006 (696.82) 70 26 2,048 64,369 250,000 12,873 (868.42) 71 27 2,048 68,055 250,000 8,582 (864.12) 72 28 2,048 71,843 250,000 4,291 (866.25) 73 29 2,048 75,734 250,000 0 (871.43)

TABLE G4 Product Stress Tolerance - Midpoint Assumptions Company D Current Midpoint Age Duration Premium CSV DB Cash Value Cash Flow IRR 45 1 1,648 0 250,000 0 1,549.69 0.00% 46 2 1,648 0 250,000 0 1,427.63 47 3 1,648 0 250,000 0 1,314.04 48 4 1,648 0 250,000 0 1,204.85 49 5 1,648 523 250,000 0 1,092.50 50 6 1,648 2,435 250,000 1,055 929.53 51 7 1,648 4,430 250,000 1,920 774.13 52 8 1,648 6,487 250,000 2,812 623.36 53 9 1,648 8,609 250,000 3,731 488.47 54 10 1,648 10,772 250,000 4,669 359.07 55 11 1,648 12,923 250,000 5,281 262.50 56 12 1,648 15,062 250,000 5,892 149.06 57 13 1,648 17,333 250,000 6,504 33.83 58 14 1,648 19,744 250,000 7,116 (38.76) 59 15 1,648 22,308 250,000 7,728 (113.95) 60 16 1,648 25,032 250,000 8,339 (224.52) 61 17 1,648 27,932 250,000 8,951 (319.86) 62 18 1,648 31,012 250,000 9,563 (412.26) 63 19 1,648 34,295 250,000 10,174 (503.62) 64 20 1,648 37,790 250,000 10,786 (576.25) 65 21 1,648 40,816 250,000 8,835 (602.94) 66 22 1,648 43,943 250,000 6,884 (620.69) 67 23 1,648 47,230 250,000 4,933 (633.05) 68 24 1,648 50,616 250,000 2,982 (633.85) 69 25 1,648 54,111 250,000 1,031 (635.87) 70 26 1,648 57,657 250,000 0 (813.04)

The ratios of 20-Year cash values on midpoint and current assumptions are shown in Table H, and the years in force at midpoint assumptions are shown in Table I.

TABLE H Product Stress Tolerance - Ratio of 20-year Cash Values on Midpoint and Current Assumptions Company A Company B Company C Company D CV₂₀ ^(MIDPOINT) 12,343 19,884 19,669 10,786 CV₂₀ ^(CURRENT) 46,398 50,474 44,303 37,790 Ratio 26.60% 39.39% 44.40% 28.54%

TABLE I Product Stress Tolerance - Years in Force at Midpoint Assumptions Company A Company B Company C Company D Years in force 26 36 29 26 at Midpoint Assumptions

Calculation of IRR premium reduction in years 4 and later for each of the example companies is shown in Tables J1-J4.

TABLE J1 Product Stress Tolerance -- Calculation of IRR Premium Reduction in Years 4 and Later Company A Du- Pre- Age ration mium AV CSV DB Cash Flow IRR 45 1 2,125 525 0 250,000 2,026.69 2.642% 46 2 2,125 2,001 0 250,000 1,880.59 47 3 2,125 3,564 0 250,000 1,744.08 48 4 1,063 4,147 0 250,000 703.80 49 5 1,063 4,739 0 250,000 616.99 50 6 1,063 5,380 0 250,000 519.02 51 7 1,063 6,057 308 250,000 405.11 52 8 1,063 6,740 1,328 250,000 269.08 53 9 1,063 7,450 2,390 250,000 148.11 54 10 1,063 8,184 3,489 250,000 31.72 55 11 1,063 8,872 5,419 250,000 (86.08) 56 12 1,063 9,452 7,100 250,000 (210.45) 57 13 1,063 10,004 8,599 250,000 (329.38) 58 14 1,063 10,524 9,908 250,000 (399.22) 59 15 1,063 10,986 10,986 250,000 (465.25) 60 16 1,063 11,395 11,395 250,000 (551.58) 61 17 1,063 11,745 11,745 250,000 (622.76) 62 18 1,063 12,018 12,018 250,000 (690.90) 63 19 1,063 12,199 12,199 250,000 (757.83) 64 20 1,063 12,271 12,271 250,000 (805.78) 65 21 1,063 12,234 12,234 250,000 (849.45) 66 22 1,063 12,042 12,042 250,000 (878.51) 67 23 1,063 11,660 11,660 250,000 (896.75) 68 24 1,063 11,050 11,050 250,000 (898.26) 69 25 1,063 10,159 10,159 250,000 (895.97) 70 26 1,063 8,926 8,926 250,000 (1,053.17) 71 27 1,063 7,272 7,272 250,000 (1,064.09) 72 28 1,063 5,100 5,100 250,000 (1,072.71) 73 29 1,063 2,290 2,290 250,000 (1,075.96) 74 30 0 0 0 0 0

TABLE J2 Product Stress Tolerance -- Calculation of IRR Premium Reduction in Years 4 and Later Company B Du- Pre- Age ration mium AV CSV DB Cash Flow IRR 45 1 1,953 909 0 250,000 1,854.69 5.883% 46 2 1,953 2,409 0 250,000 1,717.26 47 3 1,953 3,972 0 250,000 1,589.02 48 4 977 4,669 0 250,000 630.20 49 5 977 5,430 907 250,000 510.34 50 6 977 6,356 2,285 250,000 364.79 51 7 977 7,322 3,704 250,000 218.31 52 8 977 8,330 5,164 250,000 76.80 53 9 977 9,379 6,665 250,000 (48.43) 54 10 977 10,467 8,205 250,000 (168.07) 55 11 977 11,570 9,761 250,000 (264.18) 56 12 977 12,679 11,322 250,000 (375.59) 57 13 977 13,777 12,873 250,000 (486.86) 58 14 977 14,860 14,407 250,000 (553.56) 59 15 977 15,920 15,920 250,000 (621.17) 60 16 977 16,956 16,956 250,000 (712.53) 61 17 977 17,950 17,950 250,000 (787.86) 62 18 977 18,890 18,890 250,000 (859.42) 63 19 977 19,760 19,760 250,000 (929.02) 64 20 977 20,542 20,542 250,000 (978.87) 65 21 977 21,172 21,172 250,000 (1,022.67) 66 22 977 21,672 21,672 250,000 (1,051.35) 67 23 977 22,008 22,008 250,000 (1,068.72) 68 24 977 22,148 22,148 250,000 (1,068.99) 69 25 977 22,048 22,048 250,000 (1,065.22) 70 26 977 21,664 21,664 250,000 (1,220.62) 71 27 977 20,921 20,921 250,000 (1,229.29) 72 28 977 19,756 19,756 250,000 (1,235.71) 73 29 977 18,093 18,093 250,000 (1,237.07) 74 30 977 15,837 15,837 250,000 (1,233.34) 75 31 977 12,854 12,854 250,000 (1,216.73) 76 32 977 8,998 8,998 250,000 (1,202.59) 77 33 977 4,091 4,091 250,000 (1,192.59)

TABLE J3 Product Stress Tolerance -- Calculation of IRR Premium Reduction in Years 4 and Later Company C Du- Pre- Age ration mium AV CSV DB Cash Flow IRR 45 1 2,048 1,098 0 250,000 1,949.69 3.824% 46 2 2,048 2,705 0 250,000 1,807.47 47 3 2,048 4,357 0 250,000 1,674.66 48 4 1,024 5,041 0 250,000 670.85 49 5 1,024 5,740 0 250,000 585.72 50 6 1,024 6,463 138 250,000 484.04 51 7 1,024 7,214 890 250,000 355.73 52 8 1,024 7,996 1,671 250,000 230.54 53 9 1,024 8,804 2,480 250,000 119.89 54 10 1,024 9,633 3,309 250,000 13.37 55 11 1,024 10,469 4,777 250,000 (89.88) 56 12 1,024 11,279 6,219 250,000 (207.41) 57 13 1,024 12,041 7,614 250,000 (323.79) 58 14 1,024 12,750 8,955 250,000 (394.73) 59 15 1,024 13,396 10,233 250,000 (465.71) 60 16 1,024 13,929 11,399 250,000 (568.73) 61 17 1,024 14,402 12,505 250,000 (654.67) 62 18 1,024 14,804 13,539 250,000 (735.86) 63 19 1,024 15,126 14,494 250,000 (814.38) 64 20 1,024 15,356 15,356 250,000 (872.58) 65 21 1,024 15,450 15,450 250,000 (914.24) 66 22 1,024 15,382 15,382 250,000 (941.12) 67 23 1,024 15,123 15,123 250,000 (957.09) 68 24 1,024 14,541 14,641 250,000 (956.37) 69 25 1,024 13,897 13,897 250,000 (952.06) 70 26 1,024 12,851 12,851 250,000 (1,107.57) 71 27 1,024 11,456 11,456 250,000 (1,117.37) 72 28 1,024 9,665 9,665 250,000 (1,125.84) 73 29 1,024 7,418 7,418 250,000 (1,130.21) 74 30 1,024 4,643 4,643 250,000 (1,130.51) 75 31 1,024 1,251 1,251 250,000 (1,119.09)

TABLE J4 Product Stress Tolerance -- Calculation of IRR Premium Reduction in Years 4 and Later Company D Du- Pre- Age ration mium AV CSV DB Cash Flow IRR 45 1 1,648 1,387 0 250,000 1,549.69 6.823% 46 2 1,648 2,800 0 250,000 1,427.63 47 3 1,648 4,243 0 250,000 1,314.04 48 4 824 4,902 0 250,000 499.70 49 5 824 5,572 0 250,000 423.29 50 6 824 6,226 0 250,000 335.25 51 7 824 6,892 839 250,000 211.44 52 8 824 7,541 1,848 250,000 85.87 53 9 824 8,172 2,852 250,000 (23.57) 54 10 824 8,755 3,822 250,000 (126.87) 55 11 824 9,227 4,697 250,000 (205.22) 56 12 824 9,582 5,469 250,000 (297.93) 57 13 824 9,961 6,283 250,000 (394.13) 58 14 824 10,364 7,139 250,000 (449.17) 59 15 824 10,795 8,045 250,000 (508.42) 60 16 824 11,255 9,000 250,000 (604.41) 61 17 824 11,745 10,013 250,000 (686.39) 62 18 824 12,268 11,081 250,000 (766.44) 63 19 824 12,826 12,216 250,000 (846.49) 64 20 824 13,421 13,421 250,000 (908.71) 65 21 824 13,998 13,998 250,000 (956.02) 66 22 824 14,496 14,496 250,000 (988.90) 67 23 824 14,970 14,970 250,000 (1,012.28) 68 24 824 15,332 15,332 250,000 (1,019.21) 69 25 824 15,573 15,573 250,000 (1,022.99) 70 26 824 15,598 15,598 250,000 (1,186.11) 71 27 824 15,423 15,423 250,000 (1,203.39) 72 28 824 15,061 15,061 250,000 (1,219.74) 73 29 824 14,469 14,469 250,000 (1,232.19) 74 30 824 13,629 13,629 250,000 (1,240.86) 75 31 824 12,463 12,463 250,000 (1,237.78) 76 32 824 10,945 10,945 250,000 (1,238.53) 77 33 824 9,043 9,043 250,000 (1,244.89) 78 34 824 6,633 6,633 250,000 (1,244.96) 79 35 824 3,670 3,670 250,000 (1,239.95) 80 36 824 67 67 250,000 (1,222.52)

In order to set reasonable high and low points for this scoring driver, a universe of ten companies is examined, and the metrics for each one computed based on recent statutory filings. In this example, statutory filing as of Dec. 31, 2000 were examined. Where a company is a subsidiary of a larger life insurer, consolidated statutory numbers from the NAIC database are used. Management performance statistics for each of the companies A, B, C, and D are shown in Table K.

TABLE K Management Performance Statistics Management Performance Company A Company B Company C Company D Company E 5-year Average ROE 7.1% 11.0% 12.9% 13.6% 1.8% Ordinary Life Expenses/Generally Recognized Expense Table 166.3% 608.2% 342.4% 197.5% 206.1% 5-year Average PEGG 4.2% 8.8% −3.6% 118.1% 157.4% 5-year Assets CAGR 12.1% 25.5% 6.6% 23.4% 38.8% Maximum Earnings Deviation from Geometric Path 366.5% 108.6% 44.2% 24.4% 162.9% Ordinary Life Expenses/Ordinary Life Premiums 17.7% 22.7% 22.4% 14.4% 11.6% Ordinary Life Expenses/Ordinary Life Reserves 3.6% 2.3% 2.9% 1.6% 9.5% Company F Company G Company H Company I Company J 5-year Average ROE 26.9% 8.9% 18.1% 14.1% 23.3% Ordinary Life Expenses/Generally Recognized Expense Table 122.4% 73.7% 372.3% 495.5% 181.9% 5-year Average PEGG 6.2% −16.5% −3.8% 8.2% −0.3% 5-year Assets CAGR 8.3% 12.5% 9.5% 24.1% 10.9% Maximum Earnings Deviation from Geometric Path 52.1% 48.4% 125.1% 62.9% 23.1% Ordinary Life Expenses/Ordinary Life Premiums 6.5% 2.3% 15.1% 12.6% 6.6% Ordinary Life Expenses/Ordinary Life Reserves 0.9% 1.1% 2.0% 1.6% 0.9%

Historical Credited Rates

The high point is set at $6,150 and the low point at $5,800. Company D, being above the high point, receives a normalized score of 5. Historical credit rates are shown in Table L.

TABLE L Historical Credited Rates Company Company Company Company A B C D 1996 8.00% 8.30% 8.40% 8.50% 1997 7.50% 7.60% 7.80% 8.00% 1998 7.00% 6.90% 7.20% 7.50% 1999 6.50% 6.20% 6.60% 7.00% 2000 6.00% 5.50% 6.00% 6.50% $1,000 Accumulated to 2001: $6,098 $6,058 $6,123 $6,188

Company Service Quality

Company service quality indicators are shown in Table M for the example companies A, B, C, and D.

TABLE M Company Service Quality Indicators Co. Co. Co. Co. Low High A B C D Score Score Average Time to Offer 60 30 45 15 15 60 Telephone Service - 5.0 4.0 3.5 2.5 Composite Score: Days/week CSRs available 5 5 5 5 5 5 Avg # of calls/day per CSR 30 40 50 60 30 60 Hours/day customer service 8 9 9 10 8 10 available 800 # available 1 1 1 1 1 1 (1 = Y, 0 = N) Website Capabilities (1 = Y, 0 = N) Website 1 1 1 1 Specific product information 1 1 1 0 available Quote capabilities 0 0 0 0 Ability to apply online 0 0 0 0 Ability to access account 0 0 0 0 information Ability to change address, 0 0 0 0 beneficiary Application status 0 0 0 0 capabilities Total 2 1 0 0 0 7 Standard Requests -- days to process Cash loans 5 4 5 3 Cash surrenders 6 6 5 4 Non-contestable death claims 5 5 4 3 Customer correspondence 6 8 5 4 Average 5.5 5.75 4.75 3.5 3 5

Best's Rating

Best's rating for the example companies A, B, C, and D are shown in Table N.

TABLE N Number of companies by Best Ratings Percentile Score A++ 46 11.3% 100.0% 5.0 A+ 147 36.1% 88.7% 4.4 A 123 30.2% 52.6% 2.6 A− 52 12.8% 22.4% 1.1 B++ 22 5.4% 9.6% 0.5 B+ 15 3.7% 4.2% 0.2 E 2 0.5% 0.5% 0.0 Total 407 Company A A Company B A++ Company C A Company D A++

PVAS Rating

The PVAS rating is a weighted average of the normalized scores on each of the scoring drivers. This calculation is summarized in Table 0.

TABLE O PVAS Calculation Summary Company A Company B Company C Company D PVAS Rating (Out of 5 Points): 1.8 3.6 2.5 4.0 I. Product Value for Money 1.6 3.7 1.8 4.8 II. Product Stress Tolerance 0.3 3.9 3.3 1.6 III. Management Performance 1.9 2.6 2.2 4.0 IV. Product Crediting Rate History 4.3 3.7 4.6 5.0 V. Company Service Quality 2.4 3.5 2.9 3.9 VI. AM Best Rating 2.6 5.0 2.6 5.0 I. Product Value for Money IRR - current assumptions, LIMRA 1.4 4.2 1.7 5.0 lapses IRR - current assumptions, level lapses 0.8 3.8 1.0 4.6 Planned Premium to Achieve Objective 2.1 3.0 2.5 4.7 Product Flexibility 4.0 3.0 3.0 5.0 Score 1.6 3.7 1.8 4.8 II. Product Stress Tolerance Ratio of 20-year CSV for 0.4 3.6 4.8 0.9 midpoint:current assumptions Years in Force at Midpoint Assumption 0.5 5.0 2.0 0.5 IRR - current assumptions with 50% 0.0 3.5 0.0 5.0 premium years 4+ Score 0.3 3.9 3.3 1.6 III. Management Performance 5-year Average ROE 0.0 2.5 3.7 4.1 Ordinary Life Expenses/GRET 3.7 0.0 0.0 2.8 5-year Average Premium Expense 4.4 5.0 0.0 5.0 Growth Gap 5-year Assets CAGR 2.5 5.0 0.8 5.0 Maximum Earnings Deviation from 3.7 5.0 5.0 5.0 Geometric Path Ordinary Life Expenses/Ordinary Life 1.6 0.1 0.2 2.5 Premium Ordinary Life Expenses/Ordinary Life 0.7 2.8 1.9 4.0 Reserves Score 1.9 2.6 2.2 4.0 IV. Historical Credited Rates Score 4.3 3.7 4.6 5.0 V. Company Service Quality Average time to offer 2.0 4.0 3.0 5.0 Telephone service 5.0 4.0 3.5 2.5 Website capabilities 1.4 1.4 1.4 0.7 Response time for standard requests 2.8 2.7 3.3 4.1 Score 2.4 3.5 2.9 3.9 VI. AM Best Rating Score 2.6 5.0 2.6 5.0

After a purchase decision is made, that information is transmitted back to the value appraisal system to become a part of the market intelligence database and to the “winning” carrier. The value appraisal system will also be able to transmit an on-line application for the selected product to the winning carrier.

It will be apparent to those skilled in the art that various modifications and variation can be made in the system for appraising a life insurance product of the present invention without departing from the spirit or scope of the invention. Thus, it is intended that the present invention cover the modifications and variations of this invention provided they come within the scope of the appended claims and their equivalents 

1-60. (canceled)
 61. A method for appraising value of an annuity, comprising: receiving, by a computer-based value appraising system, risk profile information of an insured; receiving, by the computer-based value appraising system, information about benefits to be provided by and price to be paid for the annuity; determining an overall rating reflecting a value of the annuity, including: determining, by the computer-based value appraising system, a first rating of the value of the annuity based at least on mortality information specific to the risk profile information and on projected benefit amounts to be provided by and the price to be paid for the annuity that depend on a first assumption about the future; determining, by the computer-based value appraising system, a second rating of the value of the annuity under a less optimistic assumption with respect to the first assumption about the future based at least on a guaranteed amount of the benefits and the price; applying, by the computer-based value appraising system, a weighting to the first and the second ratings according to a relative importance of the first and the second ratings; and determining, by the computer-based value appraising system, the value of the annuity based at least on the weighting that has been applied to the first and the second ratings; and transmitting an appraisal of the value of the annuity.
 62. The method of claim 61, including the step of: receiving, by the computer-based value appraising system, information about an ability to meet financial obligations of an insurer providing the annuity.
 63. The method of claim 61, including the step of: determining, by the computer-based value appraising system, a third rating of a financial strength of an insurer providing the annuity based at least on information about an ability to meet financial obligations of the insurer.
 64. The method of claim 61, wherein determining the first rating includes determining an internal rate of return of the annuity. 65-67. (canceled) 